Charter School Bond Issuance: a Complete History Volume 2
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Local Initiatives Support Corporation Charter School Bond Issuance: A Complete History Volume 2 October 2012 CHARTER SCHOOL BOND IssUANCE: A COMPLETE HISTORY Volume 2 Written By Elise Balboni Wendy Berry October 2012 Published By The Educational Facilities Financing Center of Local Initiatives Support Corporation www.lisc.org/effc This publication and related resources are available at http://www.lisc.org/effc/bondhistoryv2 LOL CA INITIATIVES SUPPORT CORPORATION EDUT CA IONAL FACILITIES FINANCING CENTER Local Initiatives Support Corporation (LISC) is dedicated to helping community residents transform distressed neighborhoods into healthy and The Educational Facilities Financing Center (EFFC) at LISC supports quality sustainable communities of choice and opportunity — good places to work, public charter schools in distressed neighborhoods. LISC founded the EFFC do business and raise children. LISC mobilizes corporate, government and in 2003 to intensify its national effort in educational facilities financing. philanthropic support to provide local community-based organizations with: The EFFC pools low-interest loan and grant funds and leverages them for investment in charter school facilities in order to create new or renovated ■■ loans, grants and equity investments school facilities for underserved children, families and neighborhoods ■■ local, statewide and national policy support nationally. Since 1997, LISC has invested $127 million in 162 public charter school facilities across the country. The EFFC fosters long-term ■■ technical and management assistance sustainability of the charter sector by identifying replicable financing LISC is a national organization with a community focus. Our program mechanisms and sharing best practices and data through publications such Landscape Charter School Bond Issuance: A Complete staff are based in every city and many of the rural areas where LISC- as the series and History supported community development takes shape. In collaboration with . The EFFC is supported by the Bill & Melinda Gates Foundation, local community groups, LISC staff help identify priorities and challenges, JPMorgan Chase Bank, Prudential Financial, the U.S. Department of delivering the most appropriate support to meet local needs. LISC is Education and the Walton Family Foundation. Building Sustainable Communities by achieving five goals: The EFFC assembled a National Advisory Board to provide oversight ■■ Expanding Investment in Housing and Other Real Estate and leadership of its strategic mission, resource development, public policy activity and other issues relevant to the attainment of its mission. ■■ Increasing Family Income and Wealth The Advisory Board is comprised of representatives of the community development, education, finance and philanthropic communities. ■■ Stimulating Economic Development ■■ Improving Access to Quality Education ■■ Supporting Healthy Environments and Lifestyles Since 1980, LISC has marshaled $12 billion from thousands of investors, lenders and donors. In urban and rural communities nationwide, LISC has helped to finance the construction or rehabilitation of 289,000 affordable homes and 46 million square feet of retail, community and educational space — totaling $33.9 billion in development. For more information about LISC, visit www.lisc.org. EISFFC ADV ORY BOARD AEDCKNOWL GEMENTS JIM GRIFFIN We want to acknowledge the people who contributed to our research for President this study. In particular, we would like to express our gratitude to Professor Colorado League of Charter Schools (Chairman) Chris Armstrong, Assistant Professor of Accounting, The Wharton School, University of Pennsylvania; Tom Kozlik, Janney Montgomery Scott; Yaffa MARGARET ANADU Rattner and Bruce Sorenson, Piper Jaffray and Company; and John Snider, Vice President, Urban Investment Group Megan Wienand and William Wildman, RBC Capital Markets. The Goldman Sachs Group, Inc. We would like to extend special thanks to the Bill & Melinda Gates JOHN KINGHORN Foundation, and in particular Noah Wepman, for support of this research, Vice President but acknowledge that the findings and conclusions presented in this report Prudential Social Investments are those of the authors alone and do not necessarily reflect the opinions of CLAUDIA LIMA the Foundation or the individuals acknowledged above. Executive Director Finally, we would like to thank our EFFC colleagues, Kathy Olsen, Charles Los Angeles LISC Wolfson and Charmian Stewart, for their significant editing and research CARMEN MALDONADO contributions. Northeast Regional Director Canyon-Agassi Charter School Facilities Fund SAMIR K. PATEL Managing Director Tremblant Capital Group MICHAEL RUBINGER President and Chief Executive Officer LISC ANNE STOEHR Program Officer (ex officio) Walton Family Foundation CHARTER SCHOOL BOND IssUANCE: A COMPLETE HISTORY Volume 2 TABLE OF CONTENTS EXECUTIVE SUMMARY . .1 METHODOLOGY. .5 MARKET OVERVIEW . .8 Issuance Status . 8 Status by Rating at Issuance . 10 Outstanding Charter School Underlying Ratings . 12 BEST PRACTICES IN DISCLOSURE . .14 Universe. .14 Overview . 14 Financial Statements . 15 School Age . 15 Enrollment. .15 Waitlist . 15 Pro Formas . 15 Academic Data . 16 CREDIT CHARACTERISTICS AT ISSUANCE . 20 Overview . 20 School Age . 21 Enrollment. .22 Waitlist . 23 Debt Service Coverage Ratio. .24 Debt Burden. .25 Rating. .26 PRO FORMA ANALYSIS . 27 Overview . 27 Projected Growth . 28 CURRENT FINANCIAL METRICS . 29 Universe. .29 Accounting Practices . .29 Overview . 30 Analysis by Bond Rating Status . 31 Analysis by State . 37 Analysis by Underlying Rating Category . 43 COMPARISON ANALYSIS . 45 Overview . 45 Pro Forma Budget Items. .45 Debt Ratios . 46 REPAYMENT PERFORMANCE. .49 Default Rates . 49 Defaults by Issuance Year . .49 Defaults by State . 50 Credit Characteristics . 51 Time Between Issuance & Default. .51 Disclosure Comparison . 52 Charter Status & Reasons for Default . 52 Recovery . 53 Non-Monetary Defaults & Other Troubled Credits . ..